It’s easy to burn through paycheques from a summer job when the weather is good and the sales are even better. But for most students, money earned during the summer has to last well into the school year when earning potential drops dramatically. Luckily, there are ways to stretch each dollar.
Mike Henry, Scotiabank senior vice president and head of retail payments, deposits and lending, says creating a budget is key.
“Try and get a feel for how much money is going to come in over the summer and through the year—from gifts, from bursaries, from scholarships—and everything that’s going to go out.”
Try printing out this student budget worksheet by the Financial Consumer Agency of Canada.
Beyond having a plan and sticking to it, “there are other things you can do to stretch a buck for sure,” Henry said.
Pick your plastic. All you need is one good, low-fee credit card. If that card offers cash-back on a portion of your spending or rewards for things you actually use, that’s a bonus. Pick the best card for you with MoneySense’s credit card selector tool.
“Use your credit card within your budget and make sure you pay it off each month,” Henry said, adding that credit cards are a great way to have some convenience, earn rewards and build a good credit history.
Scrutinize your fees. As a student, you’re entitled to low-cost accounts with unlimited debit transactions at most banks. Get one of these while you can. (You’ll miss it once it’s gone).
Boost your income. Does your employer pay time-and-a-half on the August or September holidays? Offer to work them. If your school is nearby, offer to stay on in the fall as backup.
Automate your savings. Get paid every other Thursday at midnight? Have your bank move a lump sum of cash from your chequings account to a savings account every other Friday at 9 a.m. You can’t spend money you never had access to.
Generally, working adults are encouraged to save roughly 10% of their gross income. Students however, will need to set aside more.
“For the average student they are going to probably want to save the vast majority of what they earned during the summer months because it’s so concentrated and have that carry them through the following year,” Henry said. “That 10% rule of thumb is a great to aspire to once they’re in a regular working life.”
The best part about putting aside a nice chunk is that you can spend what’s left in your chequings account relatively guilt-free.
Henry suggests taking it even further by topping up your savings every time you make a debit purchase. The bank offers a program that rounds every purchase up to the nearest dollar and throws the excess change into the savings account of your choice. You’d be surprised how a couple of cents at every transaction can add up.
“We see on average it can build up to a couple hundred bucks over the course of the year and it provides a little cushion for folks.”
Grow your cash. Why not toss the extra money you saved into a tax-free savings account? TFSAs are great way to get an attractive return in today’s environment and keep it, all of it, Henry said.
“If you are a student and you earn the bulk of your income over the summer and you’ve got to try and bank that and budget it through the course of the year, why would you want to pay tax on the interest that those savings earn?”
Bob Stammers, CFA, and director of investor education at the CFA Institute, recommends students sidestep RRSPs in favour of other savings vehicles since young professionals typically have more pressing issues than retirement to deal with, like paying off debt and saving for a house or car.
Get to know your debt. Figure out how much debt you have and what interest rates you’re paying. “In general, you are going to want to minimize debt as much as possible,” Henry said. But not all debt is created equal so it’s important to get some professional advice on how best to manage it.
“A lot of student loans don’t kick in until after you’ve graduated so in some cases that’s good debt to carry until graduation.”
Slash you tuition. “There’s roughly $70 million of scholarships and bursaries that are available to students out there,” Henry said. And not all of them are reserved for A+ students or those with low-income families. Studentawards.com helps match Canadian students all kinds of scholarships.